Global Stock Rout Deepens in Run-Up to Jobs Data: Markets Wrap

(Bloomberg) — The global selloff in stocks intensified, with Nasdaq 100 Index futures sinking 1.6%, as traders worried that the Federal Reserve has been too slow to cut interest rates, and technology earnings disappointed.

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The next big data point for the market is Friday’s monthly jobs report, which is expected to show that US employers added workers at a slower pace last month. While Fed Chair Jerome Powell has signaled that rates are likely to be lowered in September, some investors have argued they should move faster to prevent a deeper economic slowdown.

S&P 500 contracts fell 1.1% and Japan’s Topix had its worst day since 2016. A rally in Treasuries extended into a seventh straight day, with the two-year yield slumping to its lowest in 14 months. The dollar weakened.

“The data is really starting to show signs of concern and that is what’s coming back to bite the Fed,” said Daniela Hathorn, a senior market analyst at Capital.com. “They kept signaling they’d wait for the data, and that was fine until Wednesday, but yesterday’s data has investors fearing whether it waited for too long.”

Amazon.com Inc. slid 8% in premarket trading on concern costs are rising quickly to meet demand for AI services. Intel Corp. fell more than 20% after giving a grim growth forecast and laying out plans to slash 15,000 jobs. Snap Inc. dropped 17% as revenue undershot estimates.

Forecasters anticipate the monthly US jobs numbers will show moderating job and wage growth in July, underscoring a further softening in the labor market. Payrolls probably rose by 175,000 last month following June’s 206,000 increase, according to the median estimate in a Bloomberg survey.

“In coming days there may be even a discussion about whether the Fed will have to cut by 50 basis points at the next meeting in order to catch up with the loss of momentum in the economy,” Gary Dugan, chief executive officer of the Global CIO Office, said in an interview on Bloomberg Television. “From the peak a 10%-to-15% correction wouldn’t be strange in this huge change in shift in sentiment in the markets as central banks look well behind the curve.”

Risk assets have taken a beating in recent sessions for other reasons too. Lackluster earnings from Microsoft Corp. to Amazon.com Inc. have hurt sentiment that is also being weighed down by concern about the sluggish Chinese economy and a weakening of the earlier euphoria over artificial intelligence. Middle East tensions have also multiplied after the assassination of Hamas’ political chief in Tehran.

Markets now see the Fed delivering three consecutive quarter-point cuts in September, November and December. Traders are pricing a roughly 50% chance that one of those reductions will be 50 basis points.

It’s all added up to a volatile week for markets, with the VIX Index on track for the highest closing level in nine months. The Nasdaq 100 recorded swings of at least 1.4% over the past three days. A gauge for the Magnificent Seven big tech companies was up 0.3% for the week through Thursday.

“We suggest investors brace for renewed volatility, but avoid overreacting to short-term shifts in market sentiment,” said Mark Hafele, chief investment officer at UBS Global Wealth Management.

Corporate Highlights:

Exxon Mobil Corp. exceeded profit expectations after the $63 billion acquisition of Pioneer Natural Resources Co. pushed oil and natural gas output to a record.
Chevron Corp. shares slid in premarket trading after reporting earnings per share that missed the average analyst estimate. The company also said its headquarters would move to Texas from California.

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